Florida Senate - 2011 SB 1152
By Senator Simmons
22-00610B-11 20111152__
1 A bill to be entitled
2 An act relating to limited liability companies;
3 amending s. 608.433, F.S.; providing that a charging
4 order against a member’s limited liability company
5 interest is the sole and exclusive remedy available to
6 enforce a judgment creditor’s unsatisfied judgment
7 against a member or member’s assignee; providing an
8 exception for enforcing a judgment creditor’s
9 unsatisfied judgment against a judgment debtor or
10 assignee of the judgment debtor of a single-member
11 limited liability company under certain circumstances;
12 providing legislative intent; providing for
13 retroactive application; providing an effective date.
14
15 WHEREAS, on June 24, 2010, the Florida Supreme Court held
16 in Olmstead v. Federal Trade Commission (No. SC08-1009),
17 reported at 44 So.3d 76, 2010-1 Trade Cases P 77,079, 35 Fla. L.
18 Weekly S357, that a charging order is not the exclusive remedy
19 available to a creditor holding a judgment against the sole
20 member of a Florida single-member limited liability company
21 (LLC), and
22 WHEREAS, a charging order represents a lien entitling a
23 judgment creditor to receive distributions from the LLC or the
24 partnership that otherwise would be payable to the member or
25 partner who is the judgment debtor, and
26 WHEREAS, the dissenting members of the Court in Olmstead
27 expressed a concern that the majority’s holding is not limited
28 to a single-member LLC and a desire that the Legislature clarify
29 the law in this area, and
30 WHEREAS, the Legislature finds that the uncertainty of the
31 breadth of the Court’s holding in Olmstead may persuade
32 businesses and investors located in Florida to organize LLCs
33 under the law in other jurisdictions where a charging order is
34 the exclusive remedy available to a judgment creditor of a
35 member of a multimember LLC, and
36 WHEREAS, the Legislature further finds it necessary to
37 amend s. 608.433, Florida Statutes, to remediate the potential
38 effect of the holding in Olmstead and to clarify that the
39 current law does not extend to a member of a multimember LLC
40 organized under Florida law and to provide procedures for
41 application of the holding in Olmstead to a member of a single
42 member LLC organized under Florida law, NOW, THEREFORE,
43
44 Be It Enacted by the Legislature of the State of Florida:
45
46 Section 1. Section 608.433, Florida Statutes, is amended to
47 read:
48 608.433 Right of assignee to become member.—
49 (1) Unless otherwise provided in the articles of
50 organization or operating agreement, an assignee of a limited
51 liability company interest may become a member only if all
52 members other than the member assigning the interest consent.
53 (2) An assignee who has become a member has, to the extent
54 assigned, the rights and powers, and is subject to the
55 restrictions and liabilities, of the assigning member under the
56 articles of organization, the operating agreement, and this
57 chapter. An assignee who becomes a member also is liable for the
58 obligations of the assignee’s assignor to make and return
59 contributions as provided in s. 608.4211 and wrongful
60 distributions as provided in s. 608.428. However, the assignee
61 is not obligated for liabilities which are unknown to the
62 assignee at the time the assignee became a member and which
63 could not be ascertained from the articles of organization or
64 the operating agreement.
65 (3) If an assignee of a limited liability company interest
66 becomes a member, the assignor is not released from liability to
67 the limited liability company under s. ss. 608.4211, s.
68 608.4228, or s. and 608.426.
69 (4)(a) On application to a court of competent jurisdiction
70 by any judgment creditor of a member or a member’s assignee, the
71 court may enter a charging order against the limited liability
72 company interest of the judgment debtor or assignee rights for
73 charge the limited liability company membership interest of the
74 member with payment of the unsatisfied amount of the judgment
75 plus with interest.
76 (b) A charging order constitutes a lien on the judgment
77 debtor’s limited liability company interest or assignee rights.
78 Under a charging order To the extent so charged, the judgment
79 creditor has only the rights of an assignee of a limited
80 liability company interest to receive any distribution or
81 distributions to which the judgment debtor would otherwise have
82 been entitled from the limited liability company, to the extent
83 of the judgment, including such interest.
84 (c) This chapter does not deprive any member or member’s
85 assignee of the benefit of any exemption law laws applicable to
86 the member’s limited liability company interest or the
87 assignee’s rights to distributions from the limited liability
88 company.
89 (5) Except as provided in subsections (6) and (7), a
90 charging order is the sole and exclusive remedy by which a
91 judgment creditor of a member or member’s assignee may satisfy a
92 judgment from the judgment debtor’s interest in a limited
93 liability company or rights to distributions from the limited
94 liability company.
95 (6) In the case of a limited liability company having only
96 one member, if a judgment creditor of a member or member’s
97 assignee establishes to the satisfaction of a court of competent
98 jurisdiction that distributions under a charging order will not
99 satisfy the judgment within a reasonable time, a charging order
100 is not the sole and exclusive remedy by which the judgment
101 creditor may satisfy the judgment against a judgment debtor who
102 is the sole member of a limited liability company or the
103 assignee of the sole member, and upon such showing, the court
104 may order the sale of that interest in the limited liability
105 company pursuant to a foreclosure sale. A judgment creditor may
106 make a showing to the court that distributions under a charging
107 order will not satisfy the judgment within a reasonable time at
108 any time after the entry of the judgment and may do so at the
109 same time that the judgment creditor applies for the entry of a
110 charging order.
111 (7) In the case of a limited liability company having only
112 one member, if the court orders foreclosure sale of a judgment
113 debtor’s interest in the limited liability company or of a
114 charging order lien against the sole member of the limited
115 liability company pursuant to subsection (6):
116 (a) The purchaser at the court-ordered foreclosure sale
117 obtains the member’s entire limited liability company interest,
118 not merely the member’s transferable interest;
119 (b) The purchaser at the sale becomes the member of the
120 limited liability company; and
121 (c) The person whose limited liability company interest is
122 sold pursuant to the foreclosure sale or is the subject of the
123 foreclosed charging order ceases to be a member of the limited
124 liability company.
125 Section 2. The amendment to s. 608.433, Florida Statutes,
126 made by this act is intended by the Legislature to be clarifying
127 and remedial in nature and shall apply retroactively.
128 Section 3. This act shall take effect upon becoming a law.